A range of options exist for public sector research and extension (R&E) institutions to alleviate growing financial constraints. Those that seek to make more effective use of existing resources, by making them more user-oriented and demand-responsive, are at least as important as those which seek to reduce the scope of state financing in areas where the private sector may be willing to participate or beneficiaries to pay. Most can have a positive impact in terms of fiscal, efficiency and distributional objectives. An important finding is that the scope for increased private or user financing of R&E is probably much greater than is widely recognised, although those removed from mainstream markets subsistence farmers in particular will remain largely reliant on public R&E services. In defining the most appropriate nature of the relationship between the public and private sectors, economic and institutional analysis have much to offer.